Zomato wants to cater to you
Also in today’s edition: Huawei dangles a carrot for German carmakers; Mouse goes to Antilla; Epic Play didn’t go well for Google; Sis Hiremath checks Kalyani bro
Good morning! Some people have all the luck. AP reports that a Malaysian guest staying at the luxurious The Ritz Paris had lost their diamond ring. The ring was estimated to be worth around $800,000. After a police complaint and a frantic search by the hotel security, the ring was ultimately found… in a vacuum cleaner bag at the hotel. And here we can’t even find our missing sock in the wash.
🎧 World’s most boring software is also a sport. Also in today’s edition: the hurdle in Apple’s India dreams. Listen to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.
Soumya Gupta and Adarsh Singh also contributed to today’s edition.
The Market Signal
Stocks & Economy: India’s retail price inflation rose sharply in November, as expected. Elevated food and vegetable prices contributed to the spike. Nine states experienced higher prices than the national average. Consumer prices have risen globally, with the US yesterday reporting a hike of 3.1% in November.
Powered by an expansion in the electricity, mining and manufacturing sectors, India’s industrial output gauge surged 11.7% to a 16-month high. It also benefited from a low base.
The slight rise in US inflation has not changed investors’ minds about a Fed rate cut, although they now believe the reduction will come towards the middle of 2024 rather than in the first quarter. It did not prevent them from pushing shares to new yearly records.
Asia began the day mixed with shares in Japan and Singapore rising, while the rest lagged behind their previous close. Indian equities will likely open flat.
AUTOMOBILES
An Audi-acious Pitch
Huawei Technologies has never lacked in enterprise. When the US cut off advanced semiconductor technology, the company hot-wired local expertise to make high-end chips. It has now made a tempting offer to German carmakers Mercedes-Benz and Volkswagen’s Audi.
What: The company has offered minority stakes to the Europeans in its subsidiary Intelligent Automotive Solution, which equips smart electric vehicles with software and components.
European ownership, even fractional, is a great protective cover for the sanctions-hit company. Huawei’s pin-pointed pitch is perfect as Germany has long relied on China, both for its manufacturing prowess as well as market. Now it wants to derisk, not decouple from it.
Strugglers: Huawei’s offer will be enticing for existentially challenged automakers such as Volkswagen, which are unable to cope as engineering shifts from mechanical precision to software wizardry. Incidentally, Volkswagen is adding muscle in China.
MEDIA
Reliance-Disney: Endgame Begins
Reliance is preparing to get a controlling stake in Disney India. It is creating a step-down subsidiary in entertainment arm Viacom18 to absorb Star India and will also pay cash for a controlling 51% stake in the merged entity. Reliance and Disney will also invest $1-1.5 billion in the business.
Obstacle race: Reliance is racing to close by end-January and may sign an exclusivity agreement next week, even as Zee’s merger with Sony remains uncertain. Together, Reliance-Star’s lead in the TV and movies business will be unassailable.
But the endgame needs cash, lots of it. Reliance may need to raise debt for investment and to pay the controlling stake premium. Network18 has been struggling with low margins and weak demand for advertising; its Ebitda (earnings before interest, depreciation, taxes, amortisation) declined earlier this fiscal (pdf). The merger may help boost Viacom18’s balance sheet, allowing it to take more debt.
FOOD DELIVERY
Serving Up A Moat
When Zomato reported its second consecutive quarter of net profit last month (thanks to Blinkit), we wrote about why its loyalty programme, Zomato Gold, could be a possible monkey on its back. In short, it’s boosting order volumes at the cost of margins.
The Economic Times reports that Zomato is considering adding non-food perks to Gold despite profitability concerns. That’s not the biggie, though. What is, is that the company is diversifying into catering. And so is rival Swiggy, according to The Arc.
Details: Zomato wants to “build occasions” for people to order more food. Think house parties where folks have set catered menus; this bulk order market is what Zomato wants to tap into through its network of restaurant partners.
Swiggy is also piloting a catering service in select parts of Bengaluru. If it takes off, the company will introduce it in other cities too.
The Signal
Catering culture in India is largely unorganised and dependent on the wedding industry. If Zomato and Swiggy can crack bulk orders, they’ll benefit from the healthier margins. The operative word, however, is “if”. As The Arc observed, this is an industry that largely runs on cash.
Fwiw, this isn’t the first time Zomato is dipping its toe in the catering pond. It’s been over a month since the food aggregator tied up with the Indian Railways Catering and Tourism Corporation (IRCTC) to deliver pre-ordered meals for long-distance train passengers in five cities. B2B catering may well be the way to go.
TECH
Google’s Epic Loss
It has not been a good week for Google. After the Gemini fiasco, the company has lost its case against Epic Games. A California jury unanimously agreed that Google wields monopolistic powers over the distribution of Android apps. Interestingly enough, Epic had filed (and lost) a similar case against Apple last year.
Game changer: Seemingly, two findings played a crucial role in sealing Google’s fate. One, Google’s selective deal-making with the likes of Spotify, Activision Blizzard and Nintendo exposed the mirage of a level-playing field. Second, Google’s quid pro quo with device manufacturers for excluding competing app stores. Both of these revelations showcased Google’s willingness to leverage its dominance for reducing competition.
Future tense: Epic, the maker of Fortnite, had failed to establish similar anti-competitive behaviour on Apple’s part. But the court did rule against Apple’s ‘anti-steering’ tactics. Despite that, forthcoming App Store regulations in Europe are already forcing Google and Apple to make changes.
FAMILY FEUD
Sibling Rivalry Spills Into Sebi Domain
The gloves are off in the dispute between billionaire industrialist Baba Kalyani and his sister Sugandha Hiremath.
The Kalyanis have gone to the markets regulator, Sebi, complaining that the Hiremaths unfairly blocked their attempts to buy Hikal shares from the open market. Baba’s son, Amit Kalyani, reportedly tried to buy a 1.94% stake but was rebuffed by Hikal’s compliance officer saying he held unpublished price-sensitive information about the company.
The Kalyanis allege that it was done at the behest of Hikal chairman and Sugandha’s husband Jaidev Hiremath who founded the specialty chemicals company with seed money from the siblings’ father, Neelkanthrao Kalyani. Sugandha says Neelkanthrao had promised the Hiremaths Baba’s entire stake in Hikal, now worth ₹1,300 crore (~$158 million) in a 1994 agreement. Baba refuses to part with it, claiming there was no agreement but an informal note with no legal standing.
FYI
Leaving the building: Impact investment fund Omidyar Network India is shuttering its India operations after a decade, per YourStory. The fund made investments worth over $500 million since 2013 with a 75+ portfolio, and recorded about $250 million in returns.
Pink slips: Hasbro, the Dungeons & Dragons maker, will eliminate 1,100 positions from its global workforce over the next 18 to 24 months, owing to weak toy and games sales throughout the year.
Let’s begin: Argentina has devalued its currency, the peso, by 54%, the first step in newly elected President Javier Milei’s radical economic programme.
Ka-ching: French AI startup Mistral has closed a €385 million ($415 million) funding round that values the OpenAI rival at about $2 billion. Indian logistics aggregator Shiprocket is seeking to raise over $75 million in a round led by Tribe Capital.
Winging it: SpiceJet will raise ₹2,250 crore (~$270 million) via the issuance of fresh shares to financial institutions, foreign institutional investors, high net worth individuals, and other private investors.
Red card: Sportswear giant Puma has terminated its sponsorship of Israel’s national football team. The company insists that boycott calls following Israel’s war with Hamas did not influence its decision.
Newbie on top: First-time MLA Bhajanlal Sharma will be Rajasthan’s next chief minister. The Bharatiya Janata Party has chosen new faces to lead the three states it won in the recent assembly elections.
THE DAILY DIGIT
$10 billion
Or ₹83,300+ crore. The gross revenue earned by TikTok to date (between 2016 and 2023) via in-app purchases such as virtual gifts and coins. It is the first non-gaming app to breach that mark. (Data.ai)
FWIW
Lost & found: The Loch Ness monster has nothing on Pliosaur, a Jurassic era sea monster that could grow up to 50 feet. But why are we talking about Pliosaurs? Because a 6.6 foot skull (yup, SKULL) of a Pliosaur has been found in the UK. What’s incredible about this discovery (aside from its enormous size) is that it’s incredibly well-preserved. Extracting it from the soil has been quite hard for researchers but they somehow managed. If the Ross in you is excited, then you’re gonna love the fact that the discovery will feature in a David Attenborough documentary releasing next year.
Not my Santa: What’s Christmas without some contested Santa stories? This year, the spotlight falls on the town of Bari in Italy. The town claims to house the mortal remains of Saint Nicola, the inspiration behind Father Christmas aka Santa. Legend has it that Saint Nicola was revered across the Mediterranean for his generosity. But he had a soft corner for Bari. On his death, sailors from Bari stole his bones and placed them in a Church now called the Basilica of San Nicola. Locals here celebrate Saint Nicholas on December 5th and summarily reject everything related to his consumerist counterpart from the States. Not exactly brimming with Christmas spirit there…
‘Excel’-lent PR: Microsoft clearly has sway over the nerds. After their ugly sweaters, the company is in the news for its Excel World Championship. Here, fans of the software come together for fun and some serious number crunching. Contestants spar over datasets in three 30-minute sessions. For the semi-finals, contestants with the lowest score 7.5 minutes into a semifinal are eliminated. That leads us to the final where the winner gets $3,000 prize money, a trophy and the Excel championship belt. Lame does not even cover the half of it.